The present bias is the tendency to give more weight to present costs and benefits over future ones.
Do you ever find yourself making decisions based on what you currently have instead of what you may want in the future? If so, then you are experiencing the present bias.
This phenomenon can have a significant impact on our everyday lives, both personal and professional.
The present bias is the tendency to give more weight to present costs and benefits over future ones. This can lead us to make suboptimal decisions that may have long-term consequences.
For example, you may be more likely to choose a less healthy but cheaper option for dinner tonight because it satisfies your immediate need. However, in the long run, this decision could lead to health problems down the road.
The reason we experience the present bias is because our brains are wired to value immediate rewards more than delayed ones. This is due to the brain’s “instant gratification” mechanism which evolved to help us survive in the short-term.
In the past, this may have meant choosing to eat a less nutritious but easier-to-catch meal because it provided the energy we needed to survive another day.
While this mechanism was beneficial for our ancestors, it doesn’t always lead to the best decisions in today’s world. This is because we now live in a society where we have to make decisions that will impact our lives in the future, such as retirement planning or saving for a child’s college education.
The present bias can have a number of negative effects on our lives. For one, it can lead us to make impulsive decisions that we may later regret. For example, you may be more likely to spend money on a new toy or piece of clothing that you want right now instead of saving for a larger purchase down the road.
This can also cause us to procrastinate on important tasks because we would rather do something that is more enjoyable in the present moment. For instance, you may put off studying for a test or starting a work project because it is not as fun as watching TV or browsing the internet.
Additionally, the present bias can lead us to make suboptimal financial decisions. For example, you may be more likely to invest in a stock that is doing well currently but has little potential for growth in the future. Or, you may be tempted to take out a loan with a high interest rate because you need the money now but will have to pay more in the long run.
There are a few things you can do to overcome the present bias and make better decisions for your future self.
First, it is important to be aware of the phenomenon. This will help you to recognize when you are making a decision based on the present bias.
Second, take some time to think about how your decision will impact you in the future. For example, if you are considering buying a new car, think about how much the monthly payments will be and whether you can afford them.
Third, try to delay your gratification. This means waiting a certain amount of time before acting on your impulses. For instance, you may want to wait 24 hours before making a purchase to see if you still want it as much after some time has passed.
Fourth, consider using commitment devices. This is something that will help you to stick to your goals, such as setting up a savings account that you cannot withdraw from for a set period of time.
Finally, remember that the present bias is natural and everyone experiences it to some extent. Therefore, don’t be too hard on yourself if you do make a decision that you later regret. Just try to learn from your mistake and make a better choice next time.